Unusual financing completed for Texas landfill-energy project

Dallas-based Friedman, Luzzatto & Co. and Memphis, Tenn.-based Duncan-Williams Inc. announced Dec. 4 the completion of a $9m taxable revenue bond issue to finance the construction of a 4-MW waste-to-energy project in San Antonio, Texas.

This is one of just a few bond issues in the U.S. for a landfill gas-to-electricity project, the companies noted. Friedman, Luzzatto and Duncan-Williams were co-senior managers on the bond issue. Friedman, Luzzatto is a broker/dealer and financial advisor specializing in municipal securities nationwide. Duncan-Williams is a nationally recognized full-service financial services firm.

The landfill gas-to-electricity power plant, expected to be commercially operational by the close of 2013, is located at the Nelson Gardens Landfill owned by the City of San Antonio.

The City of San Antonio authorized the issuance of the taxable revenue bonds through the Mission Economic Development Corp. (MEDC), a non-profit corporation which is authorized to issue bonds and lend the proceeds to a special purpose entity. The proceeds of the bonds were loaned to Nelson Gardens Energy LLC to construct the project. Nelson Gardens Energy was formed by New York-based Greenfield Energy to own the project. The total size of the project including debt and equity is approximately $14.8m.

“There have been very few methane gas power projects financed through the bond market,” said Barry Friedman, president, Friedman, Luzzatto. “However, because landfill gas projects are a growing sector in the alternative energy sector as utilities look for viable ways to capture unused sources of renewable energy and put them to use, I believe you will see more entities turning to the bond market for financing.”

When completed, Nelson Gardens is projected to produce 4 MW annually. CPS Energy, a utility owned by the City of San Antonio, has a 15-year power purchase agreement with Nelson Gardens Energy to buy the power. Nelson Gardens is one of three landfill gas-to-electricity projects developed by Greenfield.

A substantial boost to the project was Greenfield’s ability to secure a Section 1603 Grant for the project. The grant is part of a federal program that reimburses eligible applicants for 30% of the costs of installing specified renewable energy projects.

“We were successful in getting the bonds sold in light of the challenges presented by the relatively small size of the deal and the limited number of previous landfill gas-to-electricity projects financed through the bond market. Much of the success resulted from the unwavering commitment of the developer and the comprehensive due diligence process that allowed the investors to fully comprehend the long-term potential of the project,” said Wayne Breunig, managing director, Duncan-Williams.

TDIndustries has been engaged to construct the power facilities to be located at the landfill. TD is one of the country’s leading mechanical construction and facility service companies, with broad-based experience in constructing energy efficiency projects.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.